Thailand is among the top five recipients of foreign direct investment in the region, according to the United Nations Conference on Trade and Development.
The International Institute for Trade and Development (ITD) said the country should upgrade its soft infrastructure in preparation for a potential increase in FDI through the Asean Economic Community (AEC).
The loss of privileges under the Generalised System of Preferences is expected and the impact on the economy would be minimal, it said.
“Accelerated regional integration contributes to rising FDI flows in East and Southeast Asia where [mainland] China, Hong Kong, Singapore, Indonesia and Thailand are the top five recipients of FDI in the region,” Masataka Fujita, head of the investment trends and issues branch at Unctad, said at a seminar arranged by the UN body and ITD.
After the slump in global investment in 2012, global FDI has returned to growth and developing economies maintained their lead in receiving FDI last year, when 54 per cent or US$778 billion (Bt25.3 trillion) of global flows went to developing countries.
Developed countries received 39 per cent or $566 billion of global flows in 2013. Global inflows rose by 9 per cent to $1.45 trillion last year and Unctad projects that FDI flows could rise to $1.6 trillion this year and $1.8 trillion in 2016.
FDI inflows to East Asia rose by 3 per cent to $221 billion last year.
The major sources of FDI inflows to Asean are the Asean+6 countries, which increased from 17 per cent in 2000 to 43 per cent in 2010-12, while FDI inflows to the region from the US and EU combined have decreased from 66 per cent of total FDI in 2000 to 27 per cent in 2010-12.
“Intra-regional FDI in infrastructure and manufacturing in particular is bringing development opportunities for low-income countries,” Fujita said.
The 10 Asean member states and their six free-trade-agreement partners have launched negotiations for the Regional Comprehensive Economic Partnership. Last year FDI inflows to the 16 negotiating members amounted to $343 billion, which accounted for 24 per cent of global FDI flows.
FDI outflows from developing countries also reached a record level last year, when transnational corporations from developing countries were increasingly acquiring foreign affiliates from developed countries located in their region.
Developing countries and transitional economies such as Russia together invested $553 billion or 39 per cent of global FDI outflows last year, which is a large increase from 12 per cent at the beginning of the 2000s.
Runothai Mahaddhananond, acting executive director of ITD, said it was good news that the Unctad report expects the level of FDI in the region, especially Southeast Asia, to continue increasing in the next three years.
Although FDI to Thailand is high, increasing by $13 billion last year, some projects were put on hold since the end of last year because of the political turmoil.